General Average and Cargo Insurance

General Average is a principle of maritime law that establishes that all sea cargo stakeholders (ship owner, shipper, etc.) evenly share any damage or losses that may occur. This is as a result of voluntary sacrifice of part of the cargo to save the whole in an emergency. For instance, should the crew jettison some cargo overboard to lighten the ship in a storm. The cost to tow a disabled vessel, would be shared pro rata by both the carrier and the cargo-owners.

General average contributions are normally covered by insurance policies on the ship and the cargo interests. If the cargo is not insured, the ship owners may require a cash deposit or bond for security. While general average seldom arises, it can also be costly. All cargo owners should insure that their cargo insurance covers this important aspect of a sea shipment     of cargo.

Under the new Jason Clause (September 30, 2022), which should be in the bill of lading, it is required that the cargo owners contribute to the damages caused by the ship, crew efforts to save the ship.

As an example, a fire onboard a vessel damaged millions of dollars of cargo. General average was declared, a shipper with goods worth $100,000 in a container is facing an estimated combined General Average and salvage security bond bill of $54,000 to arrange the release of his cargo. If the security  amount is not provided in cash or bond, the vessel owner can hold the cargo. He will then have authority to sell it in order to pay the contribution due from the particular cargo.

This shows the importance of cargo insurance.

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